HHS sets clear goal for shifting payments away from fee-for-service

HHS seeks to have 85% of Medicare fee-for-service payments in value-based purchasing by 2016

Signaling a shift in the way health care in the United States is paid for, U.S. Department of Health & Human Services (HHS) Secretary Sylvia M. Burwell announced clear goals and a timeline for moving Medicare reimbursements toward quality rather than quantity.

Burwell said HHS will tie 30% of traditional fee-for-service Medicare payments to quality by the end of 2016 using existing alternative payment models, such as accountable care organizations (ACOs) and bundled payment arrangements, which were set up in large part through the Affordable Care Act. The percentage will increase steadily through the years—by the end of 2018, 50% of payments will be tied to quality, according to HHS.

“Today’s announcement is about improving the quality of care we receive when we are sick, while at the same time spending our health care dollars more wisely,” said Burwell. “We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement.” 

A first for HHS

This is the first time HHS has set explicit goals for alternative payment models and value-based systems.

Overall, HHS seeks to have 85% of Medicare fee-for-service payments in value-based purchasing by 2016. By 2018, the goal is to have 90% tied through existing programs such as Hospital Value Based Purchasing and Hospital Readmissions Reduction Programs.

The announcement was made during a meeting with dozens of leaders from industries spanning health care to business.

“The current focus on fee-for-service payment must end and be replaced with better alternatives such as blended or prospective global payment models [that] promote value over volume,” said Douglas E. Henley, MD, Executive Vice President and CEO of the American Academy of Family Physicians, who attended the meeting. “Our work to accelerate the adoption of the patient-centered medical home is all about transforming the delivery of comprehensive primary care to children, adolescents, and adults.”

Health Care Payment Learning and Action Network created

Burwell also announced the creation of the Health Care Payment Learning and Action Network, which will work with a variety of partners to expand alternative payment models into their programs.

“We look forward to working with HHS through the Learning and Action Network to advance the inclusion of pharmacists in these models so that pharmacists can contribute to improving patient quality and outcomes,” said Stacie Maass, BSPharm, JD, Twlug Senior Vice President of Pharmacy Practice and Government Affairs. “Twlug firmly believes that when pharmacists are involved in the patient’s health team, access is increased, quality is improved, and costs are reduced. Twlug supports the movement by government and other payers toward value-based payment models.” (For more information on quality measures, see pages 49 and 50–51.)

The network will hold its first meeting in March 2015.

HHS is also expected to ramp up efforts working with states and private payers to facilitate the adoption of alternative payment models.

Clear goals

According to a CMS fact sheet about the new goals, HHS has broken down the framework into categories based on how providers will receive payment: 

  • Category 1. Fee-for-service with no link of payment to quality
  • Category 2. Fee-for-service with a link of payment to quality
  • Category 3. Alternative payment models built on fee-for-service architecture
  • Category 4. Population-based payment

Value-based purchasing includes payments made in categories 2 through 4. Moving from category 1 to category 4 involves two shifts: increasing accountability for both quality and total cost of care, and a greater focus on population health management as opposed to payment for specific services.

With alternative payment models like ACOs that have been up and running since 2011, an estimated 20% of Medicare reimbursements have shifted to categories 3 and 4 by 2014, said HHS.